Cloud computing has been in the limelight since last year, aided by the worldwide adoption of remote working and learning. The significant increase in employee productivity and relatively lower overhead costs delivered by remote working structures have incentivized major businesses to adapt to these structures, which are underpinned by cloud computing technologies. A recent CNBC survey revealed that 45% of the companies are planning to adopt a hybrid working model in the second half of 2021.
Furthermore, the threatening Delta variant of COVID-19 is expected to further delay the reopening of offices, keeping fully remote or hybrid working structures as the norm in the coming months. This, coupled with the gradual 5G rollout, should drive spending on cloud services. Worldwide spending on public cloud services is expected to increase 23.1% year-over-year to $332.30 billion in 2021.
Alphabet Inc. (GOOGL)
GOOGL is one of the most popular technology companies in the world. Ranked #9 on the Fortune 500 list, the company operates through three segments—Google Services, Google Cloud, and Other Bets.
On July 8, GOOGL announced plans to acquire Japanese smartphone start-up, Pring. Valued at more than ¥20 billion ($181.66 million), the acquisition will help GOOGL gain access to the Japanese smartphone market.
GOOGL’s cloud segment this month unveiled new solutions developed alongside AT&T, Inc. (T). T’s 5G solutions combined with Google Cloud technologies are expected to facilitate new customer experiences and business services, which should make it highly demanded.
On June 30, GOOGL’s cloud services segment partnered with one of Belgium’s largest retailers, Carrefour Belgium, to support the latter’s digital transformation. This demonstrated GOOGL’s immense market reach in the cloud computing segment.
GOOGL’s revenues increased 34% year-over-year to $55.31 billion in its fiscal first quarter, ended March 31. Its operating profit grew 106.1% from its year-ago value to $16.44 billion, while its net income improved 162.3% year-over-year to $17.93 billion. Its EPS increased 166.4% from its year-ago value to $26.29.
A $19.21 consensus EPS estimate for the fiscal second quarter (ended June 2021) represents an 89.6% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. In addition, analysts expect its revenues to come in at $56.02 billion in the about-to-be-reported quarter, indicating a 46.3% rise from the same period last year. Over the past year, the stock has gained 63.63% to close Friday’s trading session at $2,539.40.
GOOGL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
GOOGL has an A grade for Sentiment, and B for quality. Of the 74 stocks in the Internet industry, it is ranked #1.
To see additional GOOGL ratings for Growth, Value, Momentum, and Stability, click here.
Salesforce.com, inc. (CRM)
CRM primarily develops customer relationship management-related cloud computing services. Its popular software includes Sales Cloud, Services Cloud, Marketing Cloud, and Customer 360 platform. The company’s primary supply channels involve direct sales, systems integrators, and consulting firms.
On July 14, CRM launched a new industry-specific application—Advertising Sales Management for Media Cloud. It is designed to help companies manage their advertising revenues through a consolidated platform, thereby eliminating the hassles of managing multiple databases.
On June 29, CRM announced an offering of $8 billion of senior notes in multiple tranches. The company plans to use the offering’s proceeds to fund its acquisition of Slack Technologies and finance its sustainability projects.
On June 23, CRM expanded its partnership with Amazon.com, Inc. (AMZN) to integrate CRM and Amazon Web Services (AWS) capabilities to develop and deploy new business applications that aid digital transformation. Regarding this, CRM Chair and CEO Marc Benioff said, “This is a milestone partnership for the technology industry and one that will enable our customers to experience an even more powerful Salesforce Customer 360 and achieve a new level of success in their business.”
In its fiscal first quarter, ended April 30, 2021, CRM’s net sales increased 23% year-over-year to $5.96 billion. This can be attributed to a 21% rise in subscription and support revenues and a 47% rise in professional services and other revenues. Its gross profit stood at $4.41 billion, up 22.1% from its year-ago value. Its net income and EPS increased 373.7% and 354.5%, respectively, from the same period last year to $469 million and $0.50.
The Street expects CRM’s revenues to rise 22.3% year-over-year to $26 billion in the current year. The company’s EPS is expected to increase at a 10.1% CAGR per annum over the next five years. Furthermore, CRM beat the consensus EPS estimates in each of the trailing four quarters. Shares of CRM have gained 28.5% over the past year and 11.9% over the past six months.
CRM has an overall B rating, which equates to Buy in our POWR Ratings system. In addition, it has a B grade for Quality and Sentiment. CRM is ranked #25 of 132 stocks in the Software – Application industry.
In total, we rate CRM on eight different levels. Beyond what we’ve stated above, we have also given CRM grades for Momentum, Value, Stability, and Growth. Click here to view all CRM ratings.
WDAY enterprise delivers cloud applications mainly for financial and human capital management. It offers Workday Financial Management, Workday Human Capital Management, and Other Applications. The company’s cloud computing software is highly demanded in the healthcare, financial and higher education industries.
On June 8, WDAY announced its plans to offer Workday Payroll for Australia and Germany. The rising demand for payroll across the EMEA and Asia-Pacific regions should boost WDAY’s market reach substantially.
On July 14, WDAY inked a partnership with the country’s fifth-largest accounting firm (by revenues) RSM US LLP, to scale the latter’s rapidly growing business and improve customer satisfaction. This demonstrates WDAY’s standing as a leading cloud financial management service provider.
WDAY’s revenues increased 15.4% year-over-year to $1.18 billion in its fiscal first quarter ended April 30. This can be attributed to a 17% rise in subscription revenues over this period. Its operating cash flow increased 71.6% from the same period last year to $452.40 million.
Analysts expect WDAY’s revenues to increase 16.5% in the current year and 18.1% next year. The company’s EPS is expected to rise at a 16.3% CAGR over the next five years. Also, WDAY has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. WDAY’ has gained 25.2% over the past year to close Friday’s trading session at $227.53.
WDAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. WDAY has an A grade for Growth and a B for Sentiment. It is ranked #27 in the Software – Application industry.
View additional WDAY ratings for Value, Momentum, Stability, and Quality here.
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GOOGL shares were trading at $2,484.64 per share on Monday afternoon, down $54.76 (-2.16%). Year-to-date, GOOGL has gained 41.77%, versus a 13.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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